The compromise solution will help government put in place a policy that should address concerns of potential overseas investors, and end the uncertainty over the investment proposals that the RBI had refused to clear.

"The RBI has now proposed a one year lock-in for such instruments," said a government official privy to the development.

The central bank may have relented because of the need to attract capital flows to bridge the record current account deficit which is estimated to touch an all-time high of 4.9% of GDP in July-September quarter.

In-built options give foreign investors right to buy more stake or sell back equity. The RBI has favoured tight regulation of any FDI inflow that has in-built call or put options arguing that such investment is essentially debt masquerading as equity, which should be closely regulated like external commercial borrowings.

The department of industrial policy and promotion, it its consolidated FDI circular last September, had even inserted a clause that any equity investment that had in-built option would be treated as external commercial borrowing subject to RBI provisions. It, however, withdrew it within a month after uproar from investors.

Industry argued that put options, which gave foreign strategic investors 'right' to sell back shares if the company failed to provide them exit through stock exchange listing or failed to meet performance benchmarks, increased investor confidence and helped attract inflows.

The RBI till now had not bought this logic and continued to regulate them as per its 2007 circular.

Experts say rarely investors exit in as short a time as a year, so this may not be much of an irritant now.

"Such covenant may not have much practical relevance, as exits via put option within a year could be rare,'' Punit Shah, partner - tax & regulatory services, KPMG.

Separately, the market regulator and finance ministry are also discussing a change in the norms under the Securities Contracts (Regulation) Act, 1956, to allow listed companies the use of 'call and put options' with adequate safeguards.